Economic Indicator Briefing - Venezuela - Inflation

In January, consumer prices rose 2.39% over the previous month according to the consumer price index for the Caracas Metropolitan Region. The reading was higher than the 1.33% increase observed in the previous month but fell short of market expectations, which had prices adding 3.50%.

The relatively low price increase was influenced by the Chávez administration's threat to expropriate businesses that rose prices without justification. To underline its commitment, the government seized the French-Colombian owned Hipermercado Exito retail stores in January and reopened them under the state-run brand of Hipermercado Bicentenario stores. While Chávez pledges 'fair prices' without 'capitalist profits', the measure only delays the inevitable price adjustments while inventories last, as the devalued exchange rate already translates into higher prices for imported merchandise.

That said, inflation in January was mostly driven by higher prices for food and non-alcoholic beverages, which was broadly expected since Venezuela imports about two-thirds of its food needs. Furthermore, higher prices for transportation as well as for alcoholic beverages and tobacco, which are also mostly imported goods, also registered significant price increases. Annual headline inflation remained unchanged at December's 26.9%. Moreover, with core consumer prices adding 2.33% in January, annual core inflation followed suit and remained unchanged at December's 25.7%.

Forecasts: This indicator is covered in the FocusEconomics Consensus Forecast. For 5-year projections, including quarterly forecasts for the next two years, please visit our Online Store.